US Taxes 2008

[Duke]

The year after I think it’s reasonable that those gains will be right back up to where I started. Check! CRAP...I already paid taxes on those gains two years back.

So I am fairly new to unsecured investing but am I really going to pay tax on the same dollar more then once? Do we get in this vicious cycle of up and down gains that get taxed as such?

No, though it seems like it. You only inflict capital gains on yourself if you sell something. If you have your investments in managed funds, they are selling and buying individual stocks regularly in order to generate profit for themselves (and, by extension, you). So say they make you $10,000 this year, on which you pay CG. If you could then hold those stocks without further trading, you would not pay CG again until you sold the stocks for a further profit. The volatility of individual holdings does not incur gains or losses until you sell them.

Of course, the reason you and I have managed accounts is to try to maximize the gains and minimize the losses.

One note of advice: if you do post a capital loss on your 2008 taxes next year, the amount you can write off is limited. HOWEVER, the remaining capital loss that is not deductible can be carried over into future years, to help offset when you do have to pay capital gains tax again.

[edit] Yeah, my rebate is going to effectively zero out my federal tax payment I just made. Of course, the withholding is gone for good, but hey, I'll get the check back that I just wrote them.

And I'll probably use it to buy a big screen, too.

 

[UnoMOTO]

No, though it seems like it. You only inflict capital gains on yourself if you sell something. If you have your investments in managed funds, they are selling and buying individual stocks regularly in order to generate profit for themselves (and, by extension, you). So say they make you $10,000 this year, on which you pay CG. If you could then hold those stocks without further trading, you would not pay CG again until you sold the stocks for a further profit. The volatility of individual holdings does not incur gains or losses until you sell them.

I realize now that I shouldn't have used capital gains in describing my situation. The monies are in managed funds that I still have to report the gain or loss at the end of the year as income, similar to reporting any interest you get from a savings account.

I don't actually take possession of the monies because we choose to reinvest them. It's not like a 401k or IRA so literally every dime has to be reported. It's an eye opener learning the difference between secured and unsecured accounts. I've been investing in funds for 15 years but all those are retirement accounts don't have a taxable event until I die or retire.

 

[Duke]

I know you don't actually take possession of the money... but actually, you do, even if you don't have it in liquid cash to spend. Your account is buying and selling stocks all the time, and that is what is generating income, even if it is immediately reinvested. So it is a real capital gain.